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China Mobile Tightens WVAS, KongZhong Revenues to Drop

PR Newswire, 1/27/10

Chinese wireless value-added service (WVAS) provider KongZhong (Nasdaq: KONG) has revised its WVAS revenues for Q1 2010 downwards due to the implementation of new measures by China Mobile (NYSE: CHL; 0941.HK).

China Mobile has begun to implement an additional series of measures which are targeted at further improving the user experience for mobile handset embedded services in addition to the introduction of a new SMS code management system, requiring WVAS providers to introduce additional notices and confirmations to end-consumers during the purchase of handset-embedded services. Services related to SMS short codes will also be required to be more tailored to the specific service offering or service partner. Previously, a single SMS code could be used for multiple service offerings or partners.

As these measures are implemented, KongZhong expects its first quarter 2010 WVAS revenues (which do not include mobile games, wireless internet services, or online game revenues) to decline by approximately 20% to 25% from third quarter 2009 levels, or to be between USD 19 mln to USD 20 mln in the three-month period ending March 31, 2010. These new revenue projections for the WVAS business already include the impact from the suspension of WAP billing, previously announced on December 10, 2009.

KongZhong does not expect its mobile game operations to be significantly impacted, and expects no impact on its online game operations as a result of these new policies.

Keywords: guidance regulation China Mobile revenue wireless WVAS SMS CHL Kongzhong 0941.HK KONG SP Q1 2010

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